Brazil, Argentina start bilateral transaction with local currencies
7/10/2008 15:51
Brazil and Argentina, two biggest economies in South America, day launched
a new payment system of bilateral transaction with their local currencies, aimed
at eliminating the US dollar as an intermedium.
The new system was agreed by
presidents of the two countries early last month to end decades of mandated
trade in dollars.
Argentine Central Bank President Martin Redrado and
Brazilian Central Bank President Henrique de Campos Meirelles signed the
enforcement of the agreement, the Payment System on Local Currency (SML), last
Thursday.
Under the system, exporters and importers from both countries will
make their exchanges with Brazilian reais and Argentine pesos.
The trade on
reais and pesos will mainly benefit the small and medium companies from both
countries because it will avoid the payment of bank charges when averting to
dollars.
According to the Central Bank of Argentina, the trade between Brazil
and Argentina is about US$25 billion per year.
Brazilian authorities said
that with the SML exporters will receive exactly the negotiated value on their
currency.
Although this new system seeks to gradually eliminate the dollar
from the bilateral trade, the dollar will continue at the exchange.
The
central banks of Brazil and Argentina will set the exchange rate between the
reais and pesos with respect to the dollar.
Brazilian authorities said that
the SML deepens the integration between Brazil and Argentina.
If the
mechanism works out without incidents between Brazil and Argentina, it will be
adopted by other countries of the Mercosur, like Paraguay and Uruguay, Brazilian
authorities said.
Brazilian and Argentine authorities said that the partial
elimination of the dollar in their bilateral trade does not have to do with the
US financial crisis since the SML was arranged a long time ago.
Economist
Mariano Lamothe from the economic website www.abeceb.com said that despite the
financial crisis in the United States, the dollar is more stable than the peso
or reais.
The new payment system has more political importance than technical
importance because it will strength ties between Argentina and Brazil, the
biggest economies of the Mercosur, Lamothe said.
Xinhua
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